14 November 2012 13:16 [Source: ICIS news]
LONDON (ICIS)--Indorama Ventures’ third-quarter net profit fell by 64% year on year to $50m (€40m) as a result of weak margins for purified terephthalic acid (PTA), polyester and polyethylene terephthalate (PET) in Asia, the Thailand-based polyester company said on Wednesday.
Core earnings before interest, taxes, debt and amortisation (EBITDA) were $110m for the quarter, compared with $136m in the third quarter of 2011, despite a slight year-on-year sales increase to $1.70bn from $1.69bn, the company said.
The weak margins are due to the ongoing slowdown of the Chinese economy, and continuing oversupply of PTA in Asia, according to Indorama.
The company also reported a slight weakening of European PET margins, while Indorama’s monoethylene glycol (MEG) and North American PET and polyester businesses were stable during the period.
“The last 12 months have witnessed extreme volatility that closely shadows what we experienced in the second half of 2008. This time, though, we are also experiencing a slowdown in Asia, particularly China and India. The severity is highly correlated to Chinese overcapacity across the downstream petrochemicals, including PTA, PET and polyester fibres,” said CEO Aloke Lohia.
“The tightness in MEG and paraxylene will limit over supply of PET and polyester. Current Asian margins below cash cost will squeeze marginal producers of polyester value chain leading to gradual recovery of margins during 2013,” he added.
PET resins generated $47m core EBITDA during the quarter compared with $78m in the third quarter of 2011. Core EBITDA for feedstocks increased by $9m to $50m, while EBITDA for the fibres and yarns division was slightly up year on year at $14m in the third quarter of the year.
The Asian market may improve in line with a predicted uptick in the economic performances of India and China, according to Indorama.
“The improvement in the macro environment in China and India is anticipated to lead to an improved sentiments and therefore partial recovery of PTA margins that are currently below cash costs for the majority of the industry in Asia,” the company added.
($1 = €0.79)
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